The book aims to prioritise what needs mastering and presents the content in the most understandable, concise and pedagogical way illustrated by real market examples. Given the variety and the complexity of the materials the book covers, the author sorts through a vast array of topics in a subjective way, relying upon more than twenty years of experience as a market practitioner. The book only requires the reader to be knowledgeable in the basics of algebra and statistics. The Mathematical formulae are only fully proven when the proof brings some useful insight. These formulae are translated from algebra into plain English to aid understanding as the vast majority of practitioners involved in the financial markets are not required to compute or calculate prices or sensitivities themselves as they have access to data providers. Thus, the intention of this book is for the practitioner to gain a deeper understanding of these calculations, both for a safety reason it is better to understand what is behind the data we manipulate and secondly being able to appreciate the magnitude of the prices we are confronted with and being able to draft a rough calculation, aside of the market data. The author has avoided excessive formalism where possible. Formalism is securing the outputs of research, but may, in other circumstances, burden the understanding by non-mathematicians; an example of this case is in the chapter dedicated to the basis of stochastic calculus. The book is divided into two parts: First, the deterministic world, starting from the yield curve building and related calculations (spot rates, forward rates, discrete versus continuous compounding, etc.), and continuing with spot instruments valuation (short term rates, bonds, currencies and stocks) and forward instruments valuation (forward forex, FRAs and variants, swaps Second, the probabilistic world, starting with the basis of stochastic calculus and the alternative approach of ARMA to GARCH, and continuing with derivative pricing: options, second generation options, volatility, credit derivatives; This second part is completed by a chapter dedicated to market performance & risk measures, and a chapter widening the scope of quantitative models beyond the Gaussian hypothesis and evidencing the potential troubles linked to derivative pricing models.
Book Details:
- Author: Alain Ruttiens
- ISBN: 9781118513453
- Year Published: 2013
- Pages: 350
- BISAC: BUS027000, BUSINESS & ECONOMICS/Finance
About the Book and Topic:
The book aims to prioritise what needs mastering and presents the content in the most understandable, concise and pedagogical way illustrated by real market examples. Given the variety and the complexity of the materials the book covers, the author sorts through a vast array of topics in a subjective way, relying upon more than twenty years of experience as a market practitioner. The book only requires the reader to be knowledgeable in the basics of algebra and statistics. The Mathematical formulae are only fully proven when the proof brings some useful insight. These formulae are translated from algebra into plain English to aid understanding as the vast majority of practitioners involved in the financial markets are not required to compute or calculate prices or sensitivities themselves as they have access to data providers. Thus, the intention of this book is for the practitioner to gain a deeper understanding of these calculations, both for a safety reason it is better to understand what is behind the data we manipulate and secondly being able to appreciate the magnitude of the prices we are confronted with and being able to draft a rough calculation, aside of the market data. The author has avoided excessive formalism where possible. Formalism is securing the outputs of research, but may, in other circumstances, burden the understanding by non-mathematicians; an example of this case is in the chapter dedicated to the basis of stochastic calculus. The book is divided into two parts: First, the deterministic world, starting from the yield curve building and related calculations (spot rates, forward rates, discrete versus continuous compounding, etc.), and continuing with spot instruments valuation (short term rates, bonds, currencies and stocks) and forward instruments valuation (forward forex, FRAs and variants, swaps Second, the probabilistic world, starting with the basis of stochastic calculus and the alternative approach of ARMA to GARCH, and continuing with derivative pricing: options, second generation options, volatility, credit derivatives; This second part is completed by a chapter dedicated to market performance & risk measures, and a chapter widening the scope of quantitative models beyond the Gaussian hypothesis and evidencing the potential troubles linked to derivative pricing models.
This book presents the quantitative aspects of financial market instruments and their derivatives in a generic and accessible fashion. Anyone concerned with financial markets have to be aware of what is happening, quantitatively speaking, behind the financial instruments behaviors. The premise of this book is based on the authors observation that practitioners understand the financial instruments they make use of, but do not necessarily master their quantitative aspects. To support the calculations the related financial instruments are briefly described, but their use (hedging, speculation) is not addressed. There are a lot of books dedicated to the quantitative finance field but are either devoted to a specific type of financial instrument, combining both the products description and use in the market, and their quantitative aspects, or to a specific mathematical or statistical/econometric theory, or otherwise, with an impressive degree of mathematical formalism, which needs a high degree of competence in mathematics, econometrics and quantitative methods. This book equips the reader the mathematical knowledge needed to explain the valuation and behavior of financial products, from traditional spot instruments to complex derivatives, in the whole set of markets, from currencies and stocks to interest rates and credit underlyings.
MARKET RISK WARNINGS Quantitative finance is partially responsible for the recent financial crises: the pricing models and tools, being based on restrictive hypotheses are presented alongside their weaknesses or inherent vulnerabilities. ACCESSIBLE APPROACH Prerequisites are limited to basic algebra and probability/statistics. The author avoids using overly sophisticated mathematical developments. UNIQUE – there is no other book centered on the quantitative aspects covering the whole scope of financial products and markets in a comprehensive and unified way (including the use of mathematical tools and notations) for general reading that offers what is needed to master quantitative finance at large. EXPERT AUTHOR the extent of the content is based on 25 years of practical experience in the financial markets. The materials are treated with pedagogical care, supported by 20 years of academic experience.
About the Author
Alain Ruttiens (Paris, France) is an Affiliate Professor at ESCP Europe Paris campus, where he teaches Mathematics of the Financial Markets. He holds a Masters Degree in Chemical Engineering (Faculté Polytechnique de Mons, Belgium), with a further degree in Operational Research (FUCAM, Mons, Belgium). The bulk of his career has been spent in the banking sector (Banque Indosuez, then KBC Bank), mainly in trading, research and development related to financial derivative instruments. He was the founder and asset manager of a hedge fund, and works as a Partner of NEURON sarl, active in consulting on financial markets, in Luxembourg. He lectures at Sorbonne university, HEC and Sciences-Po Paris, and is a Professor at Centro di Studi Bancari, Lugano (Switzerland) and at ESA (Ecole Supérieure des Affaires), Beyrouth (Lebanon). He is an IAG Fellow of the University of Louvain, Belgium, and an active member of the Decision Sciences Institute (Atlanta, USA).